What's Mokhzani up to at Yinson?

It’s a deal that just has to be scrutinised further and has the hallmarks of major corporate governance violations and conflicts of interest. It even raises questions as to whether insider trading was involved in the sharp rise of family-owned logistics and transport company Yinson Holdings’ shares ahead of a major acquisition and the emergence of a new major shareholder.

It involves Mokhzani Mahathir, son of former prime minister and current Petronas adviser Dr Mahathir Mohamad, who is also one of the major shareholders of SapuraKencana Petroleum together with Shahril Shamsuddin.

SapuraKencana was formed by the merger of Shahril’s SapuraCrest Petroleum and Mokhzani’s (
right
) Kencana Petroleum to create Malaysia’s largest and one of the world’s largest providers of integrated oilfield services. Both are major shareholders of Sapura Crest with Shahril owning about 19 percent and Mokhzani about 16 percent.

Mokhzani invested in Yinson through his investment holding company Kencana Capital Sdn Bhd, a venture with Yeow Kheng Chew. Both are executive directors of SapuraKencana. Now Kencana Capital has a stake of over 14 percent in Yinson, a stake which it acquired almost simultaneously with Yinson’s
huge acquisition
of a Norwegian company for just over RM550 million.

Yinson’s major shareholders are founder and managing director Lim Han Weng, his wife Bah Kim Lian and his brother Lim Han Joeh. Together, they controlled 56.2 percent of the company’s shareholdings as at May 30, before the latest deals. After the deals and their new share issues to Kencana Capital, their stakes go down to about 46 percent.

The interesting thing Tiger finds in this ramble into the jungles of Corporate Malaysia is the timing of the private placement exercise, the announcement of the acquisition, and the
sharp run-up
in Yinson’s price just ahead.

Is this mere coincidence?

The other is that Mokhzani is already a major shareholder in SapuraKencana. What is he doing being involved in the acquisition of oil and gas assets by another company and taking a stake in it? Do his fellow shareholders and board members know about it? Has he declared his interests?

Timing and announcement

But first the timing of the private placement exercise and the announcement of the acquisition.

May 22:
Yinson announced the details for the private placement - at a price of RM2.82 a share (a discount of about 9 percent to the closing price on that day of RM3.10) for up to 10 percent of the share capital (it is allowed 15 percent). Note that it was for up to 10 percent of the share capital, not more.

To quote an extract from the announcement: “The Proposed Private Placement will enable the Company to raise funds for YHB’s (Yinson’s) business expansion. The Proposed Private Placement will also allow YHB to strengthen its financial position.” Note that there is no mention of an acquisition.

May 31:
Kencana Capital, which has a paid-up capital of RM3 million, is identified as the party to which the private placement is made. There is a significant change, this time it is for up to 15 percent of the enlarged share capital. To quote verbatim an extract from the announcement: “To assist YHB (Yinson) with the Proposed Acquisition, KCSB (Kencana Capital) agrees to inject capital into YHB by subscribing in cash for such number of New Issue Shares.”

June 10:
Ah, yes, now comes the acquisition - of Norway’s Fred Olson Production (FOP) for RM552 million. To quote verbatim from Yinson’s announcement: “It has been identified that the proceeds from the Proposed Share Issuance will now be utilised to part finance the Proposed Acquisition.” Even for Malaysia’s jungle, Tiger says, that’s very convenient - what a machete job. And isn’t it time the authorities took a look at what’s happening over here?